Merging Wisely

With the economy in turmoil, funders are increasingly pressuring nonprofits to merge. Yet mergers are not always the right path for nonprofits in financial distress. For a healthier nonprofit sector, funders should consider a wider variety of partnership options.

In the midst of the worldwide financial crisis, funders
are increasingly suggesting that nonprofits consider
merging—that is, fusing their boards, management,
and legal entities to form a single organization. In 2009
alone, my consulting firm delivered nearly 60 presentations and workshops
on mergers and other partnership forms to more than 6,000
participants—double the previous year’s tally. Similarly, our strategic
restructuring practice (which handles mergers and other partnerships)
grew 60 percent last year, during the worst part of the recession.

Now 2010 is upon us, and the urge to merge shows no signs of
abating. Underlying this trend are two core beliefs: The nonprofit
sector has too many organizations, and most nonprofits are too
small and are therefore inefficient. Mergers, the thinking goes, would
reduce the intense competition for scarce funding. Consolidating
organizations would also introduce economies of scale to the sector,
increasing efficiency and improving effectiveness.

Yet a closer look at the nonprofit sector suggests that this thinking
is too simplistic. Mergers are risky business. They sometimes fail, although
not so frequently as in the corporate world. They usually cost
more than anticipated. They sometimes create more problems than
they solve. And the problems that they allegedly solve—too many
nonprofits, too small in size—may not be problems after all.

Instead of reflexively pulling out the biggest gun in the partnership
arsenal, nonprofits should consider a variety of ways of
working together. After facilitating some 200 nonprofit restructurings
(including mergers, administrative consolidations, and other
partnerships), my colleagues and I have developed a few rules of
thumb for when nonprofits should merge, when they should remain
fully independent, and when they should undertake unions that lie
between these two poles.1 We’ve also identified how funders can
help—or hurt—the formation of nonprofit partnerships.

THE RIGHT NUMBER OF NONPROFITS

A familiar cry in the nonprofit sector, particularly among funders,
is that there are just too many organizations competing for too few
dollars. The sector has allowed not only thousands of flowers to
bloom, but also quite a few weeds, the critics say. With the recession
upon us, they conclude, the time has come to prune.

But are there indeed too many nonprofits? Let’s take a look at the
numbers. When funders talk about mergers to reduce competition
for funding, they are usually discussing the small subset of nonprofits
that have annual operating budgets above $100,000. They aren’t
discussing the myriad small, mostly volunteer groups that make up
the bulk of the sector, because these organizations are not filling
funders’ inboxes with grant requests.

In 2005, only 170,000 of 1.4 million U.S. nonprofits reported
expenses of more than $100,000.2 And only 55,000 nonprofits had
expenses greater than $1 million, including the 5,000 hospitals and
colleges that are typically not included in discussions of the sector.

In contrast, 6.7 million of the nearly 30 million U.S. businesses
had receipts of at least $100,000, and 1.4 million had receipts greater
than $1 million.3 Compared to business, the nonprofit sector is tiny,
in both overall number and average size of organizations. Thus the
cause of the sector’s current feverish competition for funding would
not appear to be “too many actors” in the marketplace. Instead, the
principal reason for the run on funding is that, as if by some fiendish
design, there are too few dollars available to support the vital
services that nonprofits offer and that communities need.

Most nonprofits respond to what economists call market failure:
Nonprofits provide desperately needed services to constituents who
lack the means to pay the full cost. Government and private funders
must then bridge the funding gap. In bad economic times these
third-party payers pull back, leaving nonprofits with inadequate
funding—often at the very moment that they are experiencing increased
demand for their services.

Mergers cannot directly counter this dynamic, which is played out
in every recession. When third-party funders curtail their support,
nonprofits whose business models depend upon periodic infusions
of cash from these sources are at risk of failure.

As funders complain that there are just too many nonprofits, they
should also recall their own role in founding, growing, and rescuing
many of the very same groups that are now in grave financial trouble.
In good times, foundations develop new interests. They find holes in
the tapestry of needed services and encourage the creation of new
programs—as well as entirely new nonprofits—to fill the voids. They
then buffer their grantees from the vagaries of the market. When
grantees cannot generate adequate revenues from membership, sufficient
gifts from donors, or a sustaining level of earned income from
their operations, funders step in with well-timed grants that stave
off the inevitable crisis. Then, when a recession shrinks foundation
endowments, or the foundation shifts its funding priorities, it complains
that there are too many nonprofits competing for its funds.

CASES FOR MERGING

What of the proposition that many nonprofits are too small and too
inefficient, that the sector would be more stable if it comprised fewer
but stronger organizations? The sector is inefficient, this criticism
holds, because too many groups provide the same services.

Yet this conceptualization is also too simplistic. When several
organizations do similar work within a community, the community
likely needs more services, not less. For example, consider an inner-city
neighborhood that has five homeless shelters with a combined
capacity of 100 beds. A survey of this neighborhood reveals that
there are nearly 500 homeless persons living in the area. Even though
these shelters offer so-called redundant services, together they can
serve only one in five of the homeless people in their community.
The problem here is too few shelter beds, not too many.

A better conceptualization of the problem here is not the duplication
of services, but the duplication of service provider infrastructures.
Each organization employs an executive director, recruits a
board of directors, and backs an administrative structure. Each also
likely struggles to support information systems, human resource
management, and budgeting and accounting processes. Merging
organizations to combine their infrastructures often makes sense.

The merger between the Support Center for Nonprofit Management,
based in San Francisco, and the Nonprofit Development
Center (NDC), based 40 miles away in San Jose, is an example of a
successful integration that improved service delivery by combining
infrastructures.

In 1998, the Support Center was nationally respected among
nonprofit consulting and training organizations. Meanwhile, NDC
was struggling with infrastructure, cash flow, and management (the
executive had recently departed). Several major funders suggested
that the two organizations undertake a merger.

Initially, NDC balked at the suggestion. Like many nonprofits,
NDC had trouble accepting the loss of autonomy that would come
with a merger. Board members also worried about entering into a
partnership with a group of people they did not know. With falling
revenues and a leadership vacuum, however, NDC had few options.
Meanwhile, funders made it clear that they would no longer support
NDC without a merger.

Integrating the Support Center and ndc was challenging. Convening
a board of busy leaders from all over the San Francisco Bay
Area proved difficult. Even deciding where to hold the board meetings
was fraught. Cultural differences between the San Francisco- and
San Jose-based operations and staff led to inevitable tensions.

But missteps are the rule with mergers, not the exception.
“You have to budget for errors,” says Jan Masaoka, then CEO of
the Support Center and later head of the merged organization,
CompassPoint Nonprofit Services. “You will hire the wrong person,
or set up the wrong system.”

Still, the merger ultimately preserved and strengthened ndc’s
essential nonprofit management services in Silicon Valley. “The alternative
was a total shutdown of NDC,” says Masaoka. “So yes, it
was a success and it met most of the goals of the pre-merger organizations.”
Indeed, many observers now consider CompassPoint the
leading nonprofit management support organization in the nation.

Another potential merger situation arises when an organization
is close to failing, but has one or more valuable programs with solid
funding, such as ongoing government contracts or a loyal donor base.
In this kind of merger, a larger and more stable nonprofit integrates
the single program into its suite of services, salvaging the program
while adding little administrative cost. Although less drastic than
fully melding two organizations, this form of merger still requires
negotiations, agreement on terms, and ultimately, the assent of
each board of directors.

In 1994, for instance, PediatriCare, an Oakland, Calif.-based nonprofit,
was on the brink of closing. Two part-time psychologists led
the organization, which offered support groups to dozens of families
affected by devastating illnesses. The two overworked codirectors
not only recruited, supervised, and led PediatriCare’s volunteers and
interns, but also raised funds, managed finances, and handled all of
the organization’s other infrastructure requirements. By merging
with Oakland-based East Bay Agency for Children (EBAC), a larger
multiservice nonprofit that I led at the time, PediatriCare’s staff
could focus on service delivery. Meanwhile, its board members,
several of whom joined the EBAC board, could devote themselves
to fundraising. Through this merger, PediatriCare, now known as
Circle of Care, averted closing down. More than 16 years later, the
organization remains a valuable resource for its community.

THE COST OF MERGING

Despite conventional wisdom, mergers themselves do not generate
revenue or reduce expenses. In the short term, they actually require new money for onetime transactional and integration costs. Even in
the long term, the act of merging itself did not lead to substantial cost
savings for the vast majority of the mergers my firm has facilitated.
Merged nonprofits can roll together annual audits, combine insurance
programs, and consolidate staffs and boards. But they are also bigger
and more complex and require more and better management—a cost
that often exceeds the savings from combined operations.

When two Marin County, Calif.-based child welfare organizations—
Sunny Hills and Children’s Garden—decided to merge in
1999, for example, they were able to eliminate one of two existing
ceo positions. They also replaced two mid-level financial managers
with a senior-level CFO—a move that should reduce costs slightly.
But the larger, more complex multisite organization required a new
COO position, and so the merger did not save much money. It did,
however, result in an entity with improved financial management
and administrative services, says Bob Harrington, former CEO of
Children’s Garden, who now directs our firm’s Strategic Restructuring
Practice. This merger was worthwhile from a strategic perspective,
if not from a narrower cost savings viewpoint.

Casual observers often perceive cost savings after mergers. But a
closer inspection usually reveals that the merger itself did not save
the money. Instead, it created a structure within which management
was able to make the tough decisions that ultimately led to better financial
footing—decisions such as instituting layoffs, restructuring
contracts, and launching new fundraising programs, any of which
could also have been undertaken without a merger had the organizations’
leadership been willing or able to do so.

In 2004, for instance, Easter Seals and United Cerebral Palsy
(UCP) affiliates in North Carolina merged. Headquartered in Raleigh
and with offices and programs throughout the state, the combined
organization undertook a series of calculated risks that neither
party would have attempted alone, including a second merger and
the purchase of a for-profit organization, which was then converted
into a nonprofit. Easter Seals-UCP North Carolina has since grown
from an operating budget of $33 million at the time of merger to a
budget of $80 million for fiscal year 2009, through both additional
mergers and its own organic growth.

If two merging organizations under financial stress do not make
the difficult but necessary decisions that will resolve major challenges
after their union, they will experience a crisis just as surely as if they
had remained separate. In other words, a merger may provide the
right context for good leadership, decision making, and execution,
but it cannot replace them.

In 1997, for example, Northern California’s two major research
and teaching hospitals, Stanford University Medical Center and the
University of California, San Francisco, merged. Health care cost
pressures had intensified, and these two institutions thought that by
combining their substantial strengths, they could better withstand
the enormous shifts in their industry.

Within three short years, however, the two hospitals decided to
dissolve their agreement. The challenges of academic medicine, which
breeds a distinctive organizational culture of semi-independent fiefdoms,
undermined the potential financial benefits of the partnership.
Up and down the line, from administrative functions to clinical
departments to medical education, the hospitals carried duplicate
infrastructures on a massive scale. They were not able to consolidate
because, among other reasons, the medical faculty was unmoved by
management’s economic arguments and refused to get on board. As
a result, the merger did not reduce costs. Instead, it added hundreds
of new positions and caused a general financial crisis.

Although a merger is not a slam-dunk solution to financial problems,
it can offer a stronger, more sustainable structure with which
to weather an economic storm. Two volunteer boards can cast a
wider net of donor contacts than can one. A combined leadership
team can bring a wider array of perspectives and experience to problem
solving. And two organizations can bring a greater diversity of
programming. Mergers can encourage organizations to cut their
costs and enhance their revenues. Organizations should therefore
view merger as a means to implement other strategies, but not as a
strategic end unto itself.

OTHER CORPORATE INTEGRATIONS

Although a merger is the most familiar way that nonprofits can combine
their fates, it is not the only way. As the matrix at left shows,
three other forms of corporate integration change parties’ legal structures
so that they can share their strengths. The first form, management
services organizations, combines only the administrative functions
of the partners. Joint venture corporations combine a subset of
nonprofits’ programmatic functions. And the third form, parentsubsidiary
partnerships, blends both administration and programs,
usually when a merger is desired but is not technically possible.

A management services organization (MSO) is created when a
group of nonprofits creates a legally separate corporation through
which they share administrative services, most often including finance, human resources, and information technology (IT). Usually
MSOs are membership organizations whose bylaws name the
founding nonprofits as the sole members. These bylaws give ultimate
control to the nonprofits that form the MSO. MSOs can help
the founding nonprofits avoid unrelated business income tax (UBIT)
on non-mission functions. They also allow for equal control over
the separate entity.

In 2007, MACC CommonWealth was formed when five human
services agencies in Minnesota’s Twin Cities decided to consolidate
their back-office functions: finance, human resources, and IT. The
board comprises the CEOS of the five partnering entities, while a
staff of 15 offers a full range of administrative services to MACC’S
members. In addition to providing high levels of service, MACC has
achieved notable cost savings. In its first year of operation, members
experienced a 3 percent reduction in administrative costs and also
saved more than 10 percent through reduced costs for things like
employee benefits, payroll, and bulk purchasing.

A joint venture corporation uses the same structure as an mso,
but it combines programs rather than administrations. For example,
Stanford Home for Children, Sacramento Children’s Home, River
Oak Center for Children, and Sierra Adoption Services are all child
welfare programs located in central California. To consolidate their
foster care offerings for troubled youth, these four organizations
created a new nonprofit joint venture corporation called Family
Alliance. Before their consolidation, the separate programs ran
deficits because of their small sizes. After forming the joint venture
corporation, they managed to break even, strengthening the
program in the process.

No one ever begins with the idea of forming a parent-subsidiary
partnership, but sometimes that is where they wind up. In 1999, Women’s
Crisis Support and Defensa de Mujeres decided to merge. These
two Santa Cruz County, Calif.-based organizations provide shelter
and other services to women recovering from domestic violence. They
covered similar geographic areas and indeed had once been a single
organization, prior to a split. They shared similar missions and values.
Combined, they could serve the entire county and speak with a single
voice in policy discussions. Moreover, uniting their boards and staff
would create a more powerful and stable organization.

Nevertheless, a technical impediment stood in the way of their
merger: The state government of California imposed a maximum
grant size for services of their type, and each organization was already
receiving the limit. A merger would have therefore cost the
groups one of their biggest contracts.

So Women’s Crisis Support and Defensa de Mujeres instead
formed a parent-subsidiary relationship. They then consolidated
most programmatic and administrative activity in the parent. In
this way the organizations joined their programs and administration
while maintaining separate legal structures.

STRATEGIC ALLIANCES

Not all partnerships knit organizations as closely together as do
corporate integrations. Strategic alliances let organizations unite
programs and cut costs while remaining somewhat independent.

If nonprofits want to partner primarily to reduce costs, they
should examine a possible administrative consolidation. This form
allows them to share administrative services while remaining entirely
separate entities. In most cases, one group provides services
for others essentially as a vendor.

Such an arrangement brought together three Chattanooga, Tenn.-
based nonprofits in 2001. The first of these, the Creative Discovery
Museum, operated in the red from its opening in 1995 because it was
designed to accommodate far more visitors than ever materialized.

The second organization, the Hunter Museum of American Art,
faced an entirely different although equally challenging situation.
Chattanooga’s oldest cultural institution, the Hunter had become
disconnected from the community. Its outdated operational infrastructure,
with dial-up Internet access and paper-based systems, only
exacerbated the museum’s detachment. To modernize, the museum
needed major funding.

Meanwhile, the much larger Tennessee Aquarium was thriving.
Indeed, this nonprofit had excess administrative capacity: Its
finance, human resource, and other back-office functions could
take on more work without adding new staff or systems and their
attendant costs.

The two museums approached the aquarium with the idea of
merging. The aquarium countered with a proposal for an administrative
consolidation: The aquarium would provide financial, human
resources, IT, and other services for the museums. Because the aquarium
would incur only minimal costs to do this extra work, it would
charge the museums far less than they were spending. Each group
would maintain its separate mission, board, and leadership.

The three groups agreed to the arrangement. In the eight years
since the consolidation, the Creative Discovery Museum and the
Hunter have saved nearly $4 million in administrative costs. Over the
same period, the aquarium earned more than $1 million in fees from
its partners, most of which dropped straight to its bottom line.

Like administrative consolidations, joint programming uses the
same mechanism—a written agreement or contract—albeit to combine
programs rather than administrative functions while otherwise
maintaining organizational independence. Joint programming is
quite common in the nonprofit sector. We see it when a foundation
grant or government contract requires several actors to tackle a
complex problem together. Rather than making separate grants to
each party, the funder makes a single grant to one of the nonprofits.
This organization, now known as the lead agency, then subcontracts
some of the funds to the other parties.

Strategic alliances preserve greater organizational independence
than corporate integrations, often making them more palatable to
the partners. If the desired result of a partnership is to share administrative
services such as accounting, or to coordinate service
provision, a strategic alliance is the way to go. Only when the desired
result is a fuller strategic alignment does a merger or other corporate
integration make sense.

COLLABORATIONS

Collaboration is the least intense form of partnership among nonprofits
and also perhaps the most common. Unlike corporate integrations,
collaborations do not change the parties’ corporate, legal,
and governance arrangements. And unlike strategic alliances, they
do not require a written agreement specifying the roles and responsibilities
of the parties. Collaborations are informal and usually
undertaken for a specific occasion or a limited purpose.

For example, as an executive director in the 1980s, I belonged to
a collaboration made up of 25 nonprofits that all received funding
from the Alameda County (Calif.) Department of Mental Health.
Once a year, the county’s annual budget process threatened to reduce
funding for its nonprofit contracting agencies. Although for
much of the year our collaborating organizations competed for
contracts, staff, private donors, and media attention, we set aside
those issues during the budget process, when we united to oppose
budget cuts to any members of our group. We fought this annual
battle without needing to become partners in a larger sense. This
collaboration continues today.

Collaborations are appropriate when the need that brings the
parties together is either narrowly defined, time limited, or, as in
the example above, both. Despite their limited scope, collaborations
cannot succeed without a basic level of trust and transparency.
Parties that distrust one another cannot work together, at least not
effectively. I was once hired to help a group of nonprofits that were
trying to share staff recruitment. But because they distrusted one
another, they did not believe that their partners would route résumés
in the agreed manner. As a result, some parties broke the agreement,
preemptively deciding that if others were going to cheat, they should
beat them to it. Needless to say, the collaboration fell apart.

PROMOTING PARTNERSHIPS

As the economic crisis continues to take its toll, many foundations
ask whether a wave of mergers and other partnerships could
strengthen vulnerable nonprofits. The answer is, quite definitely,
“it depends.” Many factors go into partnership decisions. In the
case of a merger, for example, the most important of these factors
are mission compatibility, executive leadership, and the strength
of the proposed business model.

Partnerships also raise myriad practical issues. Corporate integrations,
for instance, require combining compensation plans, cultures,
programs, budgets, and donors. Strategic alliances must ensure a
fair exchange of value among the partners. And collaborations demand
the ability to align goals and to build effective working relationships
among groups that may also be competitors. Each of these
challenges is usually solvable, but interpersonal issues between the
groups—for example, whether they trust each another—will often
determine whether a partnership produces real value.

Given these complexities, funders should work to create a climate
where mergers and other partnerships can succeed. A first step they
can take is to advertise their support for partnerships. Many nonprofits
fear that funders view partnering as a sign of weakness. Funders
can address this fear head on by announcing the availability of grant
support for mergers and other partnerships. Some already do so, often
calling these initiatives strategic restructuring, a term we coined
more than a decade ago to cover the entire array of nonprofit partnership
options. For example, the Hawaii Community Foundation
has a Strategic Restructuring Fund, the Dyson Foundation in New
York’s Hudson River Valley has launched a Strategic Restructuring
Initiative, and the Foellinger Foundation in Indiana features strategic
restructuring in its Strengthening Organizations grants.

Funders should also stop rescuing failing enterprises. If the argument
for making a grant is that the grantee will fail without it, the
funder should let it fail. A better use of the money may be to invest
in a partnership that could save some of the failing organization’s
services, or to support an orderly dissolution.

Time is of the essence in partnerships, so funders should also
quickly support partnerships. The critical window of opportunity
is often about 30 days. Once the idea of a partnership is on the table,
it needs to start moving forward quickly or it will begin to generate
rumors and organizational anxiety that could inhibit the parties’
motivation to move forward.

To invest swiftly in partnerships, funders should also use phased
grants that first cover negotiation costs and then pay attorney fees.
Only after the parties agree to a deal should the funder support implementation.
This approach incentivizes the right behavior—doing
what is best for the organization’s mission—and discourages faux
partnership attempts that aim to attract funding.

Because executives can often be the biggest barriers to partnerships,
funders should take care to anticipate and address their concerns.
If executives fear for their jobs, they may sabotage negotiations.
Funders can also support “stay pay” or severance for certain
employees. The promise of a fair and reasonable severance allows
executives to relax and do what is right.

Finally, funders should model partnership, and not just preach it.
Nonprofit leaders note that their funders urge them to collaborate
but seldom follow their own advice. Funder partnerships can both
demonstrate the power of working together and give the funders
credibility in the eyes of their grantees.

One funder who takes collaboration seriously is Jerry Hirsch
of the Lodestar Foundation in Phoenix. For several years he has
encouraged collaboration among funders interested in supporting
nonprofit partnerships.

In today’s economic environment, with increased competition for
resources, funders increasingly look to mergers to save threatened
nonprofits. A merger is indeed a powerful intervention. Widespread
use of mergers, however, will not reduce competition among nonprofits
because “too many nonprofits” is really not the problem.
Instead, funders, nonprofits, and taxpayers alike need to rethink
how to fund activities that are socially necessary but that, by their
very nature, will never earn enough money to pay for themselves.
Mergers are just one choice on a continuum of strategic restructuring
partnership options.

3 United States Census Bureau, The 2009 Statistical Abstract of the United States.

David La Piana is the founder and president of La Piana Consulting. Since 1979,
he has worked in the nonprofit sector as a staff member, executive director, trainer,
consultant, and board member. La Piana’s latest book is The Nonprofit Strategy Revolution:
Real-Time Strategic Planning in a Rapid-Response World.

COMMENTS

In many respects, I concur with the author’s perspective. However, for an alternative if more critical perspective, please read my article at http://bit.ly/cLX3vE in which I suggest the need to “put a lid on the call for mergers and collaboration and rather focus on remediating inherent deficiencies of the nonprofit business model.

Firstly why are there so many Not-for-Profits - it is because of idealogies of people and the approach of people to do something about what “they feel good about”, which might not be the most effective reason for providing that service. If egos and thoughts can be merged, which is the most difficult, there would be a better changes of mergers taking place.

I have seen some rather rigid stances while even working together. On the other hands, splitting is also easy, when “visions and thoughts” don’t match. It is the ease of walking away that is the dis-incentive to carry on working together.

I agree that mergers are not always the best approach to meeting the funding challenges that non-profits face, but I think the exploration of merger is what often leads to the selection of more appropriate strategic options. The important thing is that organizations openly and intelligently review their options and not rule out any of the approaches in the initial stages.

This review requires resources of time, effort and dollars to conduct due diligence and often it is this resource requirement that short- circuits the analysis. Although our M Fund is modest in comparioson the large foundations that support mergers, we decided early in its development to focus on funding pre-merger expenses with no requirement that a merger actually occur.

In the two years that the M Fund has done grantmaking for pre-merger expenses we have been surprised but not deterred by how few of the grants have lead to actual mergers. We are committed to the value of the process and the belief that an informed exploration of various options is ultimately good for all those involved - most of all the clients of the non-profits who are the reason for their existence. We often remind the participants in the merger discussions to focus on how the impact of the two organizations can be enhanced and not look at how the strategic restructuring will impact boards, staff and even donors.

Three Cheers to David for sharing his experience and reflections on mergers and most particularly for his advice to the funding community that we need to clarify the problems that mergers may (or may not be) best positioned to solve.

A few thoughts…
While anecdotes are provocative and can inspire action, we need a more systematic and objective examination of the mergers (partnerhsips and alliances) that have been fostered over the last decade (in search of savings and other ambitions). An indepth analysis with a companion of regional conversations on findings would offer promise for better understanding these tools of organizational redemption and when they are most appropriatley deployed. The collection of and reflection on data before action is always a good place to start.

One final thought: I have perhaps been around too long but nevertheless stand fearful now that we are at a high-risk moment - a moment when we may find ourselves (yet again) casting about for easy solutions that we hope will calm our spirits and growing anxieties during these challenging economic times. But what we need are not easy solutions. We need leadership.

We need leadership with a vision for the power and future of the charitable sector; a vision that gives direction and purpose to our work; a vision that expresses the values that should guide the sector’s development for coming years; but most importantly a vision that clearly and with conviction establishes the role of the charitable sector in relation to its public and private sector siblings. Together we are a family with economic and social power, purpose and opportunity. Together we make our nation great.

Has there been any work or thoughts on mergers and alliances of cultural non-profits; orchestras with operas, ballets, theater, etc…? I’m the executive director of an orchestra and it is evident to me that the Arts world in the USA is not using resources wisely to produce a more stable environment and higher quality productions. Small sized arts organizations are always struggling, we use an inordinate amount of resources on administration compared to performance. Staff is often tiny and over burdened. Mergers and Alliances seem like a good way to go. But where should we begin?

I’ve had discussions with many funders, foundations and individuals that want to see arts groups collaborating. I worked in Europe where the funding sources are heavily skewed to government, however they do use the resources much more efficiently, both providing steady work for the artists and a varied set of entertainment/cultural options for the public because the arts groups are often under one umbrella or simply one non-profit.

I would be curious to know your thoughts about Arts Non-profits n today’s (and tomorrow’s) world.

I appreciate David’s candor and thorough commentary, as well as his challenge to all entities involved. I find the rhetoric around too many nonprofits disturbing. I like the example of the homeless shelters. I will agree that there are too many nonprofits when I see community needs being over-met. Until then, there is a need for more service. Exactly how that service is provided is the key question here.

We all need to extricate the egos from the picture and remember that nonprofits are all granted that status based on charitable service designed to address pressing community needs. Those that lead nonprofits need to heed this and be critical of their own practices to determine what is the best way to meet the needs. If this involves a merger or in the extreme, closing the doors to make room for something better, then, although painful, that’s how it should go. Those that fund organizations need to hold clear expectations that they expect effectiveness and efficiency on the part of the organizations they fund with regard to meeting community need. It is not their place to say exactly how, since we all know there is never one best model.

One thing is very clear. Change of any type is most successful when generated from within. I too am interested in seeing measures of the success of foundation driven collaboration and mergers. If we look closely, I suspect we will likely see that the successes come when organizations confront their own realities and think openly about how to be more successful achieving the goals they originally set out to fulfill.

Yes, we should all challenge each other and no voice should be silenced. But neither should any voice overpower the others simply because of resources or position.

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